4 Key Metrics to Measure to Achieve Transparency in Pharmacy Contracts

Est. reading time: 5 mins

Achieving transparency in pharmacy benefit contracts remains a top need for employers, as it serves as one of the primary levers for controlling the escalating costs of pharmacy benefits. In part one of this two-part series, we discussed the intricacies of pharmacy benefit contracts and strategies for creating transparency in PBM negotiations. In part two, we explore how to enforce contract performance and drive PBM accountability by understanding the key claims data and oversight components that every pharmacy plan needs to achieve full transparency. When a plan reviews 100% of its pharmacy claims (not just a sample), a multitude of insights can be gleaned. When it comes to contract performance, we emphasize these four metrics: Variance, Utilization/Spending Data, Rebates, and Guarantees.

Variances – Monitor for errors

Variances in pharmacy claims refer to the per-claim dollar amounts flagged as errors. By utilizing a technology-enabled approach, claims are analyzed against the contract terms to detect any variance. Errors are common, and in some plans, even a .5% variance could equate to hundreds of thousands of dollars.

Identifying recurring variances of the same claim type can indicate potential systemic errors in the PBM’s claims processing. When such discrepancies are detected, it is essential to escalate the issue to the PBM for a comprehensive review and a comparison against the contract terms. This process helps create a plan to reconcile and recover any erroneous spend. Expert guidance in these discussions is important, given the complexity involved in addressing variances and navigating contract negotiations with PBMs.

Utilization/Spending Data – Track trends in spending

Being able to analyze drug utilization and spending data of your members provides valuable insights for managing costs and optimizing procurement strategies. Monitoring these trends provides a line of sight into whether current utilization and spending patterns align with your expectations and objectives. It also aids in identifying new high-cost drug claims within the plan and detecting any unforeseen claims. This knowledge becomes essential in achieving cost containment, anticipating costs, and gaining insights that guide strategic decisions aligned with your organization’s goals.

To learn about how to track pharmacy metrics in more depth, watch the full webinar, Transparency in Pharmacy: Key Metrics to Drive Contract Performance.

Rebates – Keep track of rebates received vs expected

Pharmacy rebates are financial incentives offered by pharmaceutical manufacturers to PBMs as part of negotiations to secure preferred placement of medications on formularies. These rebates are then passed to the employers, presenting additional opportunities for savings. As an employer, effectively managing rebates can be difficult but is important to maximize financial benefits to the plan

It is important to closely monitor the rebates received and compare them against the expected amounts to ensure they match expectations. Often, employers receive rebate payments for the PBM without a clear explanation, leading to uncertainty about whether they are entitled to more. To overcome this challenge, evaluating the minimum expected rebates becomes important, providing a benchmark based on claims data and contract terms. Taking proactive steps to assess and manage expected rebates allows employers to gain a better understanding of their entitlements. Working with an independent pharmacy contract expert to implement this practice can optimize rebate management processes, ultimately leading to improved financial outcomes and greater control over rebate-related decisions.

Guarantees – Assess contract performance against financial terms

Within pharmacy benefit contracts, there are specific rate guarantees associated with different types of claims, such as Retail Brand 30 or Specialty medications. Closely monitoring whether the PBM is meeting these contracted rates is a key component of measuring and managing a plan.

Regularly reviewing guarantees provides valuable insights into the contract’s performance and highlights the potential need for reconciliation at the end of the year. If guarantee expectations are not met, understanding the total shortfall amount, and tracking it throughout the contract term allows for better oversight. Adopting a proactive approach allows for an employer to promptly address any discrepancies that may arise.

However, effective contract management is not just about identifying underperformance in guarantees. It’s also important to be aware of favorable outcomes, such as when contracts exceed expectations and perform exceptionally well.  By actively tracking and evaluating contract guarantees, plan managers can make informed decisions, ensure cost containment, and achieve efficient plan management. This approach is crucial for optimizing resources and maximizing the overall performance of the organization.

Take advantage of a significant opportunity to reduce overall spend

To summarize, achieving transparency and cost control in pharmacy benefit contracts requires diligent oversight and measurement of key elements. No matter where you are in your pharmacy contract, it is highly beneficial to monitor variances, utilization, spending data, rebates, and contract guarantees proactively to ensure you are getting the most out of your pharmacy contract. To learn about how to track pharmacy metrics in more depth, watch the full webinar, Transparency in Pharmacy: Key Metrics to Drive Contract Performance.

Truveris is a leading digital health company focused on delivering truth and clarity in pharmacy. Truveris’ proprietary technology, coupled with deep pharmacy expertise, helps to build a more efficient market that maximizes choice, accessibility, and prescription drug affordability. Our solutions provide the insight and knowledge to help people lead healthier and more productive lives.